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A new type of day trader chasing stimulus amidst the fierce market ups and downs has once again established its dominance, driving the stock prices of popular stocks soaring, while cryptocurrency prices have languished.
In January of this year, a large number of amateur investors organized online to speculate the unpopular stocks of companies including game console retailer GameStop and film group AMC Entertainment. Now, after calming down, some enthusiasm has returned.
According to data from Refinitiv, since Bitcoin began to fluctuate at the beginning of this month, AMC’s stock price has soared by more than 200%, and has more than doubled this week alone. GameStop, one of the most watched retail games, also rose by about a third this week.
Professional analysts said that the replay shows that the amateur fascination with the market may be longer lasting than the social restrictions that were taken last year to control the coronavirus pandemic. Some people now see it as a more permanent trend with a significant impact on the investment landscape.
“retail [traders are] Create your own motivation and follow it. We have new trends in retail leading the way, and you can no longer say that retail is the last one to know,” said Dan Pipitone, co-founder of TradeZero, a US-based brokerage firm.
Although the market has been mostly dovish in recent weeks, the assets favored by these young, tech-savvy traders have fluctuated since the beginning of the lockdown last year, who entered the stock and cryptocurrency markets in record numbers.
After the spike in January, some enthusiasm permeated the cryptocurrency instead. But the prices of Bitcoin and Ethereum-the two most popular digital currencies-have plummeted since the beginning of May. As the market’s air flowed out, it seemed to be immediately reinjected into stocks with strong retail interest.
The Goldman Sachs index of stocks most frequently mentioned on the popular r/WallStreetBets Reddit page rose 5% on Friday, and the page has become an online watering hole for day traders and some large fund managers. According to the bank, the index has risen nearly 30% so far this week.
Some of them appear in the options market, and traders can use it to bet on the direction of stocks. According to Bloomberg data, the number of AMC’s public call options has increased by 40% since Tuesday, reaching 1.8 million. According to Vanda’s data, as of Thursday’s close, the total retail net purchases of AMC stock in the past week were US$209 million, a surge of 273% from the previous week.
In the past, day traders tended to focus on specific topics or stock sectors. But Giacomo Pierantoni, an analyst at Vanda Research who tracks retail investment flows, said the new generation tends to “rotate in different asset bubbles” in global markets. “They invest in assets with strong momentum, huge upside potential and supporting news flow,” he said.
Pipitone added, “These traders are not married to any industry, they are married to style.”
Although the market share of individual investors is relatively small and the transaction amount of young investors is small, they have a huge ability to push up the price of a single stock or theme.
“They don’t necessarily transfer a lot of money, but they use a lot of derivatives,” Pirantoni said. Derivatives trading, such as the use of options and futures on stocks and cryptocurrencies, allows traders to amplify their potential earnings and their ability to drive the ups and downs of assets.
“You will get some speculative bubbles. Charles Schwab chief investment strategist Liz Ann Sonders said, and then the group turned to the next shiny object,” leading to “a series of rolling correction phases.” She added that since the influx of investors into large technology stocks in the summer of 2020, the “enthusiasm for the corners of the market” of “new day traders” has become obvious.
It is expected that this investment style of 18-40 year olds will continue to exist. Bob Cortright, CEO of brokerage technology provider DriveWealth, said: “Old school people say this will not last. This is a surge in transactions, but young investors have a different mentality.”
“This is a generation that grew up with video games… They are very smart and very fast. That’s why encryption is so exciting for them-they actually like volatility.”
Others in the investment community disagree and expect that these hyper-speculative traders will eventually become the type of investors seeking long-term capital appreciation rather than highs and lows.
This month’s “cryptocurrency collapse is the logical next step for the retail industry to lose its fascination with the market… That meme seems to be working,” Steve South, chief strategist at the Connecticut-based platform Interactive Brokers Nick said.
Despite this, others still see the post-pandemic retail boom as the beginning of a new and important investment force.
“Everyone tries to say to them’It will end badly’ or’This is not a good way to trade’, I think this basically misses the point,” Cortright added. “They are creating new ways of investing.”
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